Strategy Eac Development-V4 2011-2016

8/18/2019 Strategy Eac Development-V4 2011-2016

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4TH EAC DEVELOPMENTSTRATEGY (2011/12 – 2015/16)

On e Peopl e , On e Desti n y

Deepening and Accelerating Integration

August 2011


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ABBREVIAIONS AND ACRONYMS ............................................................................................... 5

EXECUIVE SUMMARY .................................................................................................................... 9

1.0 INRODUCION ..............................................................................................................12

1.1 Background ........................................................................................................................ 12

1.2 Te EAC Institutional Framework .................................................................................... 12

1.3 Vision and Mission .............................................................................................................12

1.4 Objectives of the Community ............................................................................................ 12

1.5 Partner States Visions and Strategies ................................................................................. 13

1.6 Broad Priority Areas in the Next Decade ...........................................................................14

1.7 Structure of the Development Strategy .............................................................................. 14

2.0 SOCIO-ECONOMIC ANALYSIS OF HE EAC REGION ................................................ 15

2.1 Political Development ........................................................................................................ 15

2.2 Macroeconomic Performance in EAC ................................................................................ 15

2.3 General rends in Economic Growth ................................................................................ 17

2.4 rade Development ............................................................................................................19

2.5 Investment .......................................................................................................................... 22

2.6 Human Development Performance ................................................................................... 24

2.7 Infrastructure Development .............................................................................................. 24

2.8 Social Sector Development ................................................................................................. 29

2.9 Cross-cutting Issues ............................................................................................................30

3.0 ASSESSMEN OF ACHIEVEMENS OF HE 3RD EAC DEVELOPMEN SRAEGY

(2006-2010) AND HE CHALLENGES EXPERIENCED .................................................32

3.1 Key Integration Pillars ....................................................................................................... 32

3.2 Social Sectors ...................................................................................................................... 35

3.3 Productive Sectors ..............................................................................................................37

3.4 Infrastructure Development .............................................................................................. 40

3.5 Sector Support Programs ................................................................................................... 43

3.6 EAC Organs & Institutions ................................................................................................ 47

3.7 Strengths, Weaknesses, Opportunities and Treats (SWO) Analysis ............................. 53

4.0 PRIORIY INERVENIONS DURING HE PERIOD 2011/12-2015/16 ..................... 55

4.1 Criteria for Prioritization ................................................................................................... 55

4.2 Key Pillars Of EAC Integration .......................................................................................... 55

4.3 Development of Regional Infrastructure ...........................................................................61

ABLE OF CONENS


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4.4 Development of Social Sectors .......................................................................................... 66

4.5 Sector Support Programmes .............................................................................................. 68

4.6 EAC Organs and Institutions ............................................................................................. 70

5 MONIORING AND EVALUAION MECHANISM ....................................................... 73

5.1 Rationale ............................................................................................................................. 73

5.2 Monitoring the implementation of the 4th EAC Development ........................................ 73

5.3 Systematic and timely reporting on the progress of implementation of 4th EAC DevelopmentStrategy................................................................................................................................ 73

5.4 Evaluation of EAC Development Strategy .........................................................................74

5.5 Institutional Framework for Monitoring and Evaluating the Strategy. ............................ 75

5.6 Monitoring and Evaluation Plans/imetables ................................................................... 75

5.7 Data Collection and Information Flow.............................................................................. 76

6 SUSAINABLE FINANCING OF HE 4H EAC DEVELOPMEN SRAEGY ............ 77

6.1 Principles o Guide Effective Resource Mobilisation ....................................................... 77

6.2 Strategies for Resources Mobilisation ................................................................................ 77

6.3 Resource Requirements for the implementation of the 4th EAC Development Strategy .78

ANNEXES: ........................................................................................................................................81

EAS AFRICAN COMMUNIYP.O.Box 1096

Arusha, anzania

el: +255 27 2504253/8

Fax: +255 27 2504255

[email protected]

www.eac.int: ----


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able 1.1 EAC Partner States Strategic Visionsable 2.1 Macroeconomic Indicators and rend towards Convergence or EAC Economies, 2005-

2010able 2.2 Budget Deficit (Exc. Grants)/GDP or EAC Partner States, 2006-2010

able 2.3 Debt or EAC Partner States, 2006-2010able 2.4 Exports and Imports o Goods as a share o GDP, 2005-2010 (%)able 2.5 otal Intra-EAC rade, 2005-2010 (US$ million)able 2.6 Sectoral Shares o GDP, 2006-2010able 2.7 Foreign Direct Investment (FDI) Inflow and Stocks (Million US Dollars)able 2.8 Human Development Index (HDI), 2006-2010able 2.9 Level o Access to Affordable and Reliable Inrastructureable 2.10 Logistics Perormance Indicators or Aricaable 2.11 Logistics Perormance Indicators (LPI) or EACable 2.12 EAC Selected Energy Indicatorsable 2.13 Internet Users and Mobile Phone Subscription in EACable 2.14 Millennium Development Goals (MDGs) or Cross-cutting Issues

able 5.1 Sample Annual Plan Matrixable 6.1 Budget Summary

Figure 3.1 A SWO Analysis o EAC Regional IntegrationFigure 5.1 MIS Data/ Inormation flow within the EAC

Annex 1: otal Intra-EAC rade, 2005-2008 (US Million Dollars)Annex 2: op Commodities in Export Value Shares, 2004-2008 average (selection based on share o

country’s total exports to EAC)Annex 3: Political Risks in East Arica, 2006-2010Annex 4: Millennium Development Goals (MDGs) or Social Sector Development, 2006-2010

ABLES

FIGURES

ANNEXES


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ACP Arican Caribbean and PacificADEC Arican Development and Economic Consultants LtdADS-B Automatic Dependent Surveillance – Broadcast /– ContractAGOA Arican Growth and Opportunity ActAPSEA Association o Proessional Services in East Arica

ASAL Arid and Semi-Arid LandsASEAN Association o Southeast Asian NationsAWEPA Association o European Parliaments or AricaBAT British American obaccoBMU Beach Management UnitBPO Business Process OutsourcingCASSOA Civil Aviation Saety and Security Oversight Agency CB Central Bank CBO Community Based OrganisationCET Common External ariffCM Common Markets

COMESA Common Market or Eastern and Southern AricaCPMR Conflict Prevention, Management and ResolutionCSOs Civil Society OrganizationsCTC Counsel to the Community CU Custom’s UnionEAA ACA East Arican Association o Anti-Corruption AuthoritiesEABC East Arican Business CouncilEAC East Arican Community EACB East Arican Central BankEACDF East Arican Community Development FundEAC-DS East Arican Community Development Strategy EACF East Arican Cooperation Forum

EACJ East Arican Court o JusticeEADB East Arican Development Bank EAHRC East Arican Health Research CommissionEALA East Arican Legislation Assembly EASC East Arican Standards CommitteeEASRA East Arican Securities Regulatory AuthoritiesEATCA East Arican ourism and Wildlie Coordination Agency EATWCA East Arica ourism and Wildlie Conservation Agency ECOWAS Economic Community or Western Arican StatesEPA Economic Partnership AgreementEPZ Export Promotion Zones

ER Exchange RateESAMI Eastern and Southern Arica Management InstituteESRF Economic and Social Research FoundationEU European UnionFAO Food & Agriculture OrganisationFDI Foreign Direct InvestmentFEAC Federation o East Arican ConsultantsFEPA Framework or Economic Partnership AgreementFMIS Financial and Management Inormation SystemFPI Foreign Portolio InvestmentGDP Gross Domestic ProductGLHARIF Great Lakes and Horn o Arica Region Inter-Parliamentary ForumGMO Genetically Modified OrganismsGNSS Global Navigation Satellite SystemGRP Gross Regional ProductHDI Human Development IndexHLTF High Level ask Force

ABBREVIAIONS AND ACRONYMS


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HRD Human Resource DevelopmentIATA International Air ransport AssociationICAO International Civil Aviation OrganizationICGR International Conerence on the Great Lakes RegionICRG International Country Risk Guide

ICT Inormation and Communication echnology IDC International Development Consultants LtdIEC Inormation, Education and CommunicationIFC-ESMD International Finance Corporation and Efficient Securities MarketIGAD Inter-Governmental Authority on DevelopmentILO International Labour OrganizationIOM International Organisation on MigrationIUCEA Inter University Council o East AricaLPI Linux Proessional InstituteLVBC Lake Victoria Basin CommissionLVEMP Lake Victoria Environnemental Management Programme

LVFO Lake Victoria Fisheries OrganizationM&E Monitoring and EvaluationMAC Monetary Affairs CommitteeMDG’s Millennium Development GoalsMEAC Ministry o East Arican Community MIS Management Inormation SystemMoU Memorandum o UnderstandingMTEF Medium erm Expenditure Framework MTR Mid-erm Review NCPR Nyerere Centre or Peace ResearchNMCs National Monitoring CommitteesNORAD Norwegian Agency or Development

NTBs Non-ariff BarriersODA Official Development AssistanceOECD Organisation or Economic Co-operation and DevelopmentPMTCT Prevention o Mother to Child ransmissionPPP Public-Private PartnershipPRSP Poverty Reduction Strategy PaperREC’s Regional Economic CommunitiesRICTSP Regional Inormation Communications echnology Support ProgrammeRISP Regional Indicative Support ProgrammeSADC Southern Arican Development Community SALW Small Arms and Light Weapons

SEZ Special Economic ZoneSMEs Small and Medium EnterprisesSQMT Standardization, Quality Assurance, Metrology and estingSTAR Strengthening o Regional rade in Agricultural input in AricaSAP Structural Adjustment ProgramsTAC echnical Advisory committeeTIFA rade Investment Framework AgreementUFIR Upper Flight Inormation RegionUNIDO United Nations Industrial Development OrganisationWAIPA World Association o Investment Promotion AgenciesWTO World rade OrganizationWTU World ravel Market


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Te East Arican Community Development Strategy or the period 2011/12-2015/16 outlines broadstrategic goals o the East Arican Community as well as the specific targets to be achieved during theperiod.

Tis Strategy, the ourth one since the establishment o the East Arican Community, comes in the wake o

successul conclusion o the 3rd Development Strategy and the onset o the EAC Common Market. Lessonsand experiences emanating rom the implementation o the previous Development Strategy have providedimportant inputs in the ormulation o the ourth Development Strategy.

Te broad outline o this Strategy encompasses priority projects and programmes to be implemented by2015/16. Tese centre on the consolidation o the Customs Union, Common Market, the establishment oa Monetary Union and laying the oundations or the political ederation plus the promotion o solid andeconomic inrastructure (including energy) that would support and spur economic growth in the PartnerStates.

We, the Heads o State o the Republic o Burundi, the Republic o Kenya, the Republic o Rwanda, theRepublic o Uganda and Te United Republic o anzania, appreciate and applaud the good work that

has been undertaken by the Organs and Institutions o the Community in producing this DevelopmentStrategy. We believe that effective implementation o the Strategy will steer the region to greater heightso regional and international competitiveness, bring about aster and robust socio-economic developmentand boost the welare and prosperity o the people o East Arica. Our respective Governments are ullycommitted to the implementation o this Development Strategy.

Done at Arusha, anzania, on the 30th day o November, in the year wo Tousand and Eleven.

PREFACE


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H.E PIERRE NKURUNZIZA

PRESIDENT OF THE REPUBLIC OF BURUNDI

H.E MWAI KIBAKI

PRESIDENT OF THE REPUBLIC OF KENYA

H.E PAUL KAGAME

PRESIDENT OF THE REPUBLIC OF RWANDA

H.E. YOWERI K. MUSEVENI

PRESIDENT OF THE REPUBLIC OF UGANDA

H.E DR JAKAYA M. KIKWETE

PRESIDENT OF THE UNITED REPUBLIC OF TANZANIA


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Te Te East Arican Community (EAC) is a regional inter governmental organization established underArticle 2 o the reaty or the Establishment o the East Arican Community that entered into orce in July2000. Te membership o the Community comprises the Republics o Burundi, Kenya, Rwanda, Ugandaand the United Republic o anzania. As stated under Article 5 (2) o the reaty,“the Partner States undertaketo establish among themselves and in accordance with the provisions of this reaty, a Customs Union, a

Common Market, subsequently a Monetary Union and ultimately a Political Federation in order to strengthenand regulate the industrial, commercial, infrastructural, cultural, social, political and other relations of thePartner States to the end that there shall be accelerated, harmonious and balanced development and sustainedexpansion of economic activities, the benefit of which shall be equitably shared.”

Te Community has made significant progress during the last 10 years o integration. In particular, thereis a much desired shif rom the initial negative mind-set and little excitement on the integration processto strong political will that has catalysed business confidence and improved people’s awareness about thebenefits and costs o integration. Te Customs Union in particular catalyzed remarkable trade expansion.Intra-EAC trade grew by 40% between 2005 and 2009. Uganda’s exports to Kenya increased more thantenold rom USD15.5 Million in 2004 to USD172 Million in 2009, while anzania’s exports to Kenya

over the same period nearly tripled , rom USD 95.5 Million to USD 300 Million. Tis pattern is expectedto be enhanced with the Common Market which came into orce in July 2010. Tis increased trade andinvestment among the EAC Partner States has broadened prospects or economic growth and development.

Te growth in trade was complemented by the significant growth in cross-border investment in theservices sectors cutting across banking, insurance and tertiary education. Cross-border investment as wellas mergers and acquisitions have become major drivers and contributors to growth o investments in theregion. For instance, East Arican Breweries has acquired 51% shares in anzania’s Serengeti Breweries;rans Century o Kenya has substantial investment in anzania Cables and anzania’s ANELEC, whileBIDCO has significant investment in the edible oil sector in Kenya, Uganda and anzania. On the otherhand, anzanian ood processing companies such as AZAM have made some inroads into Uganda and

Rwandan markets. Tere is still a challenge o motivating more cross-border investments into Kenya,whose private sector is the more aggressive in penetrating the regional market and beyond EAC.

Te regional economy has grown significantly despite the global financial and economic crisis experiencedbetween mid-2007 and early 2009. otal GDP o the five EAC Partner States grew rom USD 30 Billion in2002 to USD 75 Billion in 2009 (reer able 2.1) and is expected to reach USD 80 billion by 2012. Moreover,all the Partner States’ economies have managed to tame inflation to within single digit levels, except duringthe peak o the global financial crisis and the recent drought and uel induced price increases.

While all EAC Partner States have liberalized their economies, the pursuit o macroeconomic convergenceremains a key ocus o all the economies. Te benchmark indicators o sustained GDP growth rates o 7%,inflation rates o 5%, single digit interest rates and gross national savings above 20% are yet to be achieved.

Nevertheless, the perormances o these indicators have generally remained stable.

Tough ragile, the institutional ramework and systems or delivery o Community agenda has beenentrenched at national and regional levels. Te establishment o the East Arican Legislative Assembly(EALA) and the East Arican Court o Justice (EACJ) are models in Arica in terms o regional legislativeoversight and jurisprudence. Te operationalisation o the institutions to manage the implementation o theCustoms Union and Common market has created the impetus or a robust Community. Te institutionalramework has urther benefitted rom establishment o national ministries coordinating the EAC Affairs.Further the Community was enlarged through the accession o Rwanda and Burundi.

Te democratisation processes has taken root in all the EAC Partner States. Multi-party elections are

held regularly through transparent and open processes, which are also reely contested in case odiscontent. Te EAC has established a process o electoral observance in all the Partner States and hasreceived accolades or its objective and value-added reports on these elections. Te greatest hindrance todemocratic consolidation in EAC are the perennial conflicts within the horn o Arica and the great lakesregion, terrorism and piracy that have led to prolieration o small arms and influx o reugees into the

EXECUIVE SUMMARY


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region. However, a number o regional initiatives, with positive outcomes, have been embraced to addressthe above challenges. At the international level, EAC has gained recognition as a ully fledged regionaleconomic community. Te Community has made satisactory strides in orging strong cooperation inpolitical matters particularly in areas o deence, peace and security which are key prerequisites or the

regional integration process.

Te prevalence o NBs, inadequate inrastructure; institutional handicaps; inadequate national levelcapacities to domesticate regional policies; divergent socio-economic structures; supply side constraints;weak legal, regulatory and dispute settlement mechanisms and requisite powers or EAC to enorceCommunity obligations and decisions; delays in operationalization o EAC competition Act; mismatchduring the implementation o trade acilitation instruments and processes are some o the major constraintsthat slowed the achievement o the ull benefits o the Customs Union.

Te private sector potentials in spurring economic development require urther harmonisation o macro-economic and sectoral policies both at national and regional levels. In addition increased institutionalcoordination and governance; a more robust financial sector that effectively integrates the SMEs; and

business riendly administrative structures and tax regimes will go a long way in acilitating private sectorsuccess. Similarly continued concerted efforts to build private sector capacities to cope with the ongoingglobalisation business environment in which production is ragmented through outsourcing and off-shoring. Tis thereore calls or alternative business strategies or survival at regional, national and firmperceptive levels. Te ongoing cooperation with the regional private sector bodies, mainly the East AricanBusiness Council (EABC), the Jua Kali/Nguvu Kazi/Katwe associations and through trade and investmentpromotion conerences builds the oundation upon which private sector networks can be expanded.

On the sub regional cooperation, the EAC has maintained strong bonds o collaboration with theCOMESA, SADC under the ripartite arrangements and IGAD sub-regions in an endeavour to establisha wider regional market to support rapid industrialisation, trade expansion and ast tracked development

o linking inrastructure between the member countries. In June 2011, the Joint Summit o the ripartiteheld its 2nd Joint Summit which launched the negotiations or the Grand Free rade Area, underscored theneed or aster development o inrastructure and the urgent need or an industrialisation strategy or theripartite.

Te implementation o the 4th strategy will be built on the achievements o the first decade while prioritizingconsolidation o the benefits o a ully fledged Customs Union-, including enhancing market access andtrade competitiveness; implementation o the Common Market ; concluding and establishing the MonetaryUnion while laying the Foundation or a Political Federation. In order to support the regional integrationprocess the strategy has prioritised expansion o productive capacities to acilitate product/servicediversification and inrastructure network development or enhanced connectivity within the region

and the global community. At institutional level, the mandates o the various Organs and Institutionsand related acilitating institutions shall be reviewed and developed to take account o the expanded anddeepened regional agenda.

Te key drivers or the realization o the EAC regional integration agenda in the next five years include:creation o a strong legal ramework; strategic selection and harmonization o prioritized programmesat national and regional levels; application o common policies and gradual elimination o all barriersto trade; devolution o power and authority to EAC Organs and Institutions commensurate with the levelo regional integration agenda; and establishment o regional institutional rameworks among others. Inrecognition o the global changes, research and technological development and investing in knowledge willneed to take centre stage. Other key strategic drivers that will underpin the regional integration agenda areincreased private sector, Civil Society Organisations (CSOs) and citizenry involvement; good governance,transparency and accountability; and political stability, peace and security and the continued cooperationat the ripartite and multi-lateral levels.


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Te strategy is estimated to cost USD 1,288,538,790 in the next five years. It is anticipated that, the on-going consultations on alternative financing mechanisms or the East Arican Community will be concludedsoon, and a more sustainable mechanism identified to ensure timeliness and sustainability in programme/project implementation. Furthermore innovative ways o tapping non-conventional sources o resources

to include Public Private Partnerships (PPP), Foreign Direct Investments (FDI) and portolio investmentincluding leveraging available resources to mobilize additional unds to support regional developmentshould be explored.


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1.1 Background

Te East Arican Community (EAC) is a regional inter-governmental organization established underArticle 2 o the reaty or the Establishment o the East Arican Community that entered into orce in July2000. Membership o the Community comprises the Republics o Burundi, Kenya, Rwanda, Uganda andthe United Republic o anzania. Pursuant to the provisions of paragraph 1 of Article 5, the Partner Statesundertake to establish among themselves, a Customs Union, a Common Market, subsequently a MonetaryUnion and ultimately a Political Federation in order to strengthen and regulate the industrial, commercial,infrastructural, cultural, social and political relations. Tis is meant to enhance accelerated harmonious,balanced development and sustained expansion of economic activities.

Te Community operationalises the reaty through medium-term development strategies. Te 1st Development Strategy covered the period 1997 -2000 and ocused on the re-launching o EAC, a periodusually reerred to as the confidence building phase. Te 2nd Development Strategy covered the period 2001-2005 and mainly ocused on the establishment o the EAC Customs Union and laying the groundworkor the Common Market. Te 3rd Development Strategy (2006 – 2010) prioritized the establishment o theEAC Common Market and while the 4th Development Strategy covering the period July 2011 to June 2016mainly ocuses on the implementation o the EAC Common Market and the establishment o the EACMonetary Union. In all these Strategies, cross-cutting projects and programmes in sectors such as legal and judicial, inrastructure, energy, social development, and institutional development were also carried out.Te 4th Development Strategy (2011-2016) takes into account consolidating the benefits o a ully-fledgedCustoms Union, ull implementation o the Common Market and laying the oundation or the attainmento Monetary Union and Political Federation and continuing implementation o other priority projects andpr0grammes.

1.2 Te EAC Institutional Framework

In accordance with Article 9 o the EAC reaty the EAC, the institutional ramework o the Community consists o the Executive, the Legislative and the judicial arms. Te Executive arm is composed o theSum-mit o the Heads o State (playing the broad Vision setting role), and the Council as the policy makingorgan, the Secretariat which is the executive organ o the Community and EAC Institutions. Te Legisla-tive and Judicial arms are made up o the East Arican Legislative Assembly and the East Arican Court oJustice respectively. Te unctions, mandates, and operational rameworks o these Organs and Institutionsis set outin the reaty, Protocols, and Rules o Procedures

1.3 Vision and Mission

Te Vision o EAC is to attain a prosperous, competitive, secure and politically united East Arica. TeMission is to widen and deepen economic, political, social and cultural integration in order to improvethe quality o lie o the people o East Arica through increased competitiveness, value added production,enhanced trade and investment. Te Brand o the East Arican Community is ‘‘One People, One Destiny ’’.

1.4 Objectives of the Community

Te broad objective o EAC as stipulated in Article 5 o the reaty is to develop policies and programmesaimed at widening and deepening cooperation among the Partner States in political, social and cultural

fields; research and technology, deence, security and legal and judicial affairs.

Article 5 o the reaty stipulates that the Community shall ensure the:

1.0 INRODUCION


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a) attainment o sustainable growth and development o the Partner States;b) strengthening and consolidation o cooperation in agreed fields;c) promotion o sustainable utilization o the natural resource base in the region;d) strengthening and consolidation o the long standing political, economic, social, cultural and

traditional ties;e) promotion o people-centred mutual development;) promotion o peace, security and stability;g) enhancement and strengthening o partnerships with the private sector and civil society; andh) Mainstreaming o gender in all its endeavours among others.

1.5 Partner States Visions and Strategies

Te economic, social and political development or the EAC Partner States is supported by their strategic visions as indicated in the able 1.1 below.

able 1.1: EAC Partner States Strategic Visions

Partner State ime Frame Strategic Vision Priority Areas

Kenya Vision 2030Globally competitive and prosperous

Kenya with a high quality o lie.

o achieve sectoral objectivesincluding meeting regional and

global commitments

Uganda Vision 2035ransorm Ugandan society rompeasant to a modern prosperous

country.

Prominence being given toknowledge based economy

anzania Vision 2025

High quality o lie anchored on peace,

stability, unity, and good governance,rule o law, resilient economy and

competitiveness.

Inculcate hard work, investment

and savings culture; knowledgebased economy; inrastructuredevelopment; and Private Sector

Development.

Rwanda Vision 2020Become a middle income country by

2020

Reconstruction, HR developmentand integration to regional and

global economy

Burundi Vision 2025Sustainable peace and stability andachievement o global developmentcommitments in line with MDGS.

Poverty reduction, reconstructionand institutional development.

EAC reaty Attain a prosperous, competitive, secure

and politically united East Arica

widen and deepen economic,political, social and cultural

integration at regional and globallevels

While the Partner States visions and strategies were prepared independently, they are in line with the objectiveso the Community which is meant to develop policies and programmes aimed at widening and deepeningco-operation among the Partner States in political, economic, social and cultural fields, research andtechnology, deence, security and legal and judicial affairs, or the Partner States’ mutual benefits. All thePartner States share in the dream o achieving a middle income status by 2030. Te ourth developmentstrategy will in its unique regional character and priority programmes contribute to these aspirations.


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1.6 Broad Priority Areas in the Next Decade

O ver the next decade (2011–2020) the E A C will ocus on improving her global competitiveness or asterand sustainable economic growth and move closer to the status o a newly industrialized regionSpecificareas o ocus will include establishment o a robust legal and administrative ramework that acilitates theregional economy to generate income and wealth; improvement and expansion o inrastructure, energyaccess, improvement and sustained long-term stability in the macro-economic environment; improvemento health, primary education and training; investment in higher education and training; developmento financial markets; technology development; innovation; increased efficiency in production anddistribution; and increased trade with other RECs and globally through strong and continuous support tothe on-going process o creating a COMESA-EAC-SADC Grand Free rade Area and identification o newinternational markets.

Te EAC will also develop policy measures ocused on augmenting human capital by expanding andimproving the quality o education, health and an economic environment that supports higher job creationto absorb new entrants into the labour market.

Agriculture and ood security will receive more serious attention by the EAC in the next Decade to tap thegreat potential that the Sector offers. Tis will be achieved through implementation o the EAC Agricultureand Food Secuirity Action Plan so as to ensure structural change as well as technological upgrading oagriculture, especially in the ace o adverse climate change.

In the context o the oregoing dynamic transormations, the budget as well as the decision-making systemso the EAC will undergo urther reorm or a more sustainable budget financing and efficient policy makingmechanisms.

Finally, as the EAC enters the second decade, and in view o the oregoing, the EAC reaty will be reviewedto reflect the new realities and align it to the Community’s uture dynamics and developments.

1.7 Structure of the Development Strategy

Te Strategy is organized into six (6) Chapters: Chapter 1 introduces the EAC, and the manner in which theCommunity operationalises her 5-year Development Strategies. Chapter 2 presents the socio-economicanalysis o the EAC Region both rom internal and international perspectives, Chapter 3 highlights theCommunity’s achievements during the period 2006-2010, and the challenges experienced, Chapter 4outlines the priority interventions that will drive the process towards achieving EAC’s broad objectivesin the next five years. Chapter 5 defines the ramework or implementation coordination, monitoring andevaluation, and Chapter 6 builds a case or an alternative and sustainable financing mechanism or the EAC

in uture.

Te Implementation Matrix indicating the development objectives and strategic interventions includingresponsible actors, time rame, targets, perormance indicators and budget estimates required in the next5 years is attached as Annex 1.

I N T R O D U C T I O

N


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Tis Strategy is inormed by global, pan-Arican, regional and national commitments and in particularglobal issues o climate change and its effects on the environment, ood security; residual effects o global

financial crisis and persisting insecurity occasioned by terrorism, piracy, and democratisation processes.Further, the strategy leverages on existing political and macro-economic stability, national and regionalcompetences and resources to strengthen the policy and regulatory rameworks.

2. 1 Political Development

Democracy is critical in the achievement o sustainable economic growth and development. Te EACPartner States are working towards greater democratic environment. Te countries have held multi-partyelections through transparent and open processes. Te greatest hindrance to democratic consolidation inEAC is the perennial conflicts within the horn o Arica and the great lakes region, terrorism and piracythreats including the prolieration o small arms and influx o reugees into the region.

Te EAC is participating in initiatives to improve peace and stability in the region with a view to increasingeconomic development prospects. Tese include peace and security missions in Somalia and DemocraticRepublic o Congo; the Sudanese Comprehensive Peace Agreement (CPA), the Great Lakes region, andthe Intergovernmental Authority on Development (IGAD) initiatives through which security and stabilityo the greater Eastern Arica region will be pursued. Within the EAC, Partner States are envisioning theormation o the East Arican Political Federation to advance socio-economic and political developmentamong the five Partner States in line with AU aspirations.

2.2 Macroeconomic Performance in EAC

Te ultimate goal o regional integration in East Arica is the attainment o long term high economicgrowth that can achieve and sustain human development. owards this end, EAC Partner Statescommitted themselves to maintaining an economic convergence criteria stated in the benchmarkso able 2.1. For EAC Partner States to achieve middle income status , the 3rd Development Strategy(2006-2010) envisaged that the EAC Partner States had to achieve sustained economic growth rates inexcess o 7 per cent. Other benchmarks include budget deficits o less than 5%, 4-months import cover,maximum budget deficits o 5%, sustainable public debt and single digit inflation rates. In spite o thepositive developments, the challenge o macro-economic convergence in the major macroeconomicindicators or all Partner States persisted in the 3rd EAC Development Strategy (2006-2010) as presentedin able 2.1 in which nearly all indicators under perormed with regard to EAC convergence criteria.

2.0 SOCIO-ECONOMIC ANALYSIS OF HE EAC REGION


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able 2.1: Macroeconomic Indicators and rend towards Convergence for EAC Economies, 2005-2010

AggregateEAC

PartnersBenchmarks 2006 2007 2008 2009 2010

GDP GrowthRate

Uganda

>7%

7.0 8.1 10.4 3.9 5.6Kenya 6.3 7.0 1.5 2.6 5.6

anzania 6.7 7.1 7.4 6.0 7Rwanda 8.6 7.7 11.5 6.1 7.5Burundi 5.2 3.6 4.3 3.5 3.9

Inflation– AnnualAverage

Uganda

20%

16.4 15.6 12.5 10.0 14.4Kenya 14.8 13.9 16.0 13.3 12.2

anzania 17.75 18.32 14.78 20.55 21.21Rwanda - 12.7 15.7 11.5 10.5Burundi 11.6 12.2 12.8 6.3 13.7

Reservesimport cover

Uganda

4- months

5.5 5.8 5.3 5.4 4.8

Kenya 2.6 4.1 3.9 3.8 4.9anzania 5.0 4.8 4.3 5.6 6.3Rwanda 5.6 4.7 4.7 5.4 5.2Burundi 1.4 2.3 3.1 3.2 3.5

Per capitaincome

ConstantUS $)

Uganda

>$3,000

308 342 365 310 295Kenya 439 458 453 451 526

anzania 479 535 515 459 460Rwanda 336.3 391.4 479.1 520.1 540.5Burundi 109 110 111 112 165

Source: National Bureaus of Statistics Reports (Various)

2.1.1 GDP Growth Rate

Te socio-economic perormance among the East Arican Partner States has shown remarkableimprovement (able 2.1) as the region seeks to integrate urther. Te new membership o Burundiand Rwanda in the EAC trade integration process has come to urther widen the market up to 135.5million people in 2010. Te expanded trade and investment among the EAC Partner States has increasedeconomic growth and development prospects in the region, with regional GDP (at constant 2000 levels)increasing rom US$42.4 billion in 2006 to 74.5 billion in 2009 and is expected to reach $ 80 billion in2012. Uganda, Rwanda and anzania sustained incremental growth trends between 2006 and 2008. Tedecline in 2009 was in part caused by the effects o the global financial crisis, high uel prices, draughtamong others. Te Kenyan economy in addition suffered rom the effects o the 2007 post election crisis.Burundi despite her political challenges continues to experience positive growth rates. Te projectionsor 2010 generally indicate the economies are on re-bound. Kenya’s economy remains relatively large at

about 35.7% compared to that o the other EAC partner states. Te prospects are high or all partner statesto achieve an economic growth rates averaging over 7 per cent that can ensure realization o economicand human development in the long term. Te per capita incomes, though generally low, depict steadyincrease over time (able 2.1) but way below the benchmark o US$ 3,000 o a middle income status. Teper capita levels o the EAC partner states are consistent with low income countries.

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2.2.2 Inflation – Annual AverageExcept or the sporadic periods o price increases due to global financial crisis, uel prices, ood shortagesand the requent drought occurrences in the region, the prices have remained generally high but stable.Te high inflation hurts the overall macroeconomic environment that is one o the prerequisites oreconomic growth and development. In 2008, inflation rates surged to double digit levels in all the

partner states, coinciding with the global financial crisis. Uganda, Kenya, anzania, Rwanda andBurundi inflation rates were at 12.0 per cent, 16.2 per cent, 10.3 per cent, 15.4 per cent and 24.5 per centrespectively in 2008. Recovery trends started in 2009 will prevail into 2010, where single digit inflationsrates, though above the benchmark o 5%, are projected. While inflation rates comparisons havebeen undertaken rom 2006, it was only in 2010 that all Partner States inflation rate calculations wereharmonised.

2.2.3 Interest Rate

Interest rates in the region have remained almost constant and above the inflation rates or the period2006 to 2010; confirming that securing credit or investment is prohibitive in the region. Further, none ofthe Partner States had achieved a single digit interest rate as envisaged by the 3rd Development Strategy

(2006-2010). Slight declines are projected or 2010 or all the Partner States. It is hoped that with consistentdevelopment o the financial sector, the interest rates can urther be lowered to levels that can, in part,increase investments through access to affordable credit.

2.2.4 Current Account Deficit (less ransfers) /GDP

Te current account deficit or the partner states o the region have been widening especially between2006 and 2008 except or Burundi, an indication that reflects a surge in imports in excess o exports. Tecomposition o the imports was predominantly inputs and capital goods which is consistent with the caseor low income countries. Te recovery experienced in 2009 is projected to decline in 2010 or most o thePartner States. A widening deficit can be addressed by enacting policies to increase exports at the samerate as imports.

2.2.5 Gross National Savings/GDP

Increased domestic savings can accelerate the pace o economic growth and development. Except oranzania in 2009 and 2010, the EAC partner states saving rates on average are below 20 per cent o GDP,the benchmark to sustain accelerated pace o economic growth. Most Partner States saving rates are onthe decline except or Burundi which experienced an increased in 2010. . Te EAC Partner States need tocreate a savings culture among her people to mobilize unds or investment.

2.2.6 Import CoverAll the Partner States except or Burundi have by and large met the our months import coverrequirements in 2009 and 2010. Tis implies the Partner States have adequate reserves to sustaininternational transactions.

2.3 General rends in Economic Growth

2.3.1 EAC Budgetary DeficitsTe EAC Partner States have been experiencing budget deficits due to high development financial needs.As indicated in able 2.2 below the budget deficits in all the Partner States were mixed. Rwanda budgetdeficits have generally remained at a two digit level while the budget deficit in Burundi declined to asingle digit starting in 2009. Te remaining partner states sustained single digit budget deficits duringthe plan period though above the benchmark o 6%. Uganda, Kenya and anzania budget deficits havemaintained downward trends up to 2009 but declined in 2010.


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able 2.2 Budget Deficit (Exc. Grants)/GDP for EAC Partner States, 2006-2010

AggregateEAC

PartnersBenchmarks

2006/07

2007/08

2008/09

2009/10

2010/11

BudgetDeficit(Exc.

Grants)/GDP

Uganda


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possible generate wealth and employment opportunities to reduce poverty.

2.4 rade Development

2.4.1 External rade in Goods Share of GDPOne o the main and undamental objectives o the EAC is to enhance trade and thereore economicgrowth and development among Partner States. As indicated in able 2.4 below, the trade shares o GDPor all the Partner States is significant and increasing. Te overall declines in 2009 can in part be explainedby the impact o the global financial crisis.

Te trend in exports and imports as a share o GDP shows that the region imports more than it exportsto the rest o the world. Te export share o Uganda averaged 15-23 percent between 2006 and 2009compared to 25-32 per cent import share. Kenya’s export share averaged 26 percent in comparison toimport share average o 35 percent during 2006-2009. Te corresponding ratios or Rwanda and anzaniaare 9-15, 27-31 and 11-18, 21-34 per cent respectively.

able 2.4 Exports and Imports of Goods as a share of GDP, 2005-2010 (%)

Total trade share of GDP (%) Percentage Point Changes

Country/Year

2005 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010

Uganda 39 44 49 52 55 57 5 5 3 3 2

anzania 33 39 41 49 43 49 6 2 8 -6 6

Kenya 36 48 48 53 48 53 12 0 5 -5 5

Rwanda 37 38 38 46 36 …. 1 0 8 -10

Burundi 31 33 32 35 31 36 2 -1 3 -4 5

Exports share of GDP (%) Percentage Point Changes

Country/Year

2005 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010

Uganda 14 15 19 20 23 21 1 4 1 3 -2

anzania 11.9 12.2 12.2 15.0 15.7 18.4 0.3 0 2.8 0.7 2.7

Kenya …. 15.6 15.0 16.3 14.6 16.1 15.6 -0.6 1.3 -1.7 1.5

Rwanda 10.0 10.0 10.0 15.0 9.0 …… 0 0 5 -6 ……

Burundi 7.6 6.4 6.0 6.0 5.1 6.8 -1.2 -0.4 0 -0.9 1.7

Imports share of GDP (%) Percentage Point Changes

Country/Year

2005 2007 2007 2008 2009 2010 2006 2007 2008 2009 2010

Uganda 25 29 30 32 32 36 4 1 2 0 4

anzania 21.2 27.1 28.8 33.8 27.3 30.4 5.9 1.7 5 -6.5 3.1

Kenya 36 32.1 33 36.5 33.3 37.1 -3.9 0.9 3.5 -3.2 3.8

Rwanda 27 28 28 31 27 …. 1 0 3 -4 …..

Burundi 23.7 26.6 25.9 28.7 25.8 29.3 2.9 -0.7 2.8 -2.9 3.5 Source: National Statistics Bureau Reports (Various).

Te surge in imports, in part, is attributed to importation o raw materials and capital equipment ordomestic production. According to the World Bank data (2010), importation o agricultural raw materials

as a percentage o total imports remained constant at 1.4 per cent while that o IC goods increased rom6.2 per cent in 2006 to 7 per cent o total imports in 2009. Te amount o valued added imports increasedrom 16 per cent in 2006 to 23.4 per cent o total imports in 2008.


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2.4.2 Intra-EAC rade Performance

able 2.5 on intra-EAC trade, value o total trade, exports, imports, and trade balance between PartnerStates within the EAC region; and with the rest o the world or the period 2005 to 2009, indicates thatintra-EAC regional trade perormance is growing unlike the declining extra-regional EAC trade. Exceptor Burundi and Rwanda, all the other Partner States are showing improvement in their trade balances. Te

intra- EAC trade has been improving, but most o the partner states still have more potential or growthprovided there is an expansion o the manuactured sector through adoption o value added policies aretaken seriously.

able 2.5 otal Intra-EAC rade, 2005-2010 (US$ million)

otal EAC rade otal trade annual changes

Country/Year

2005 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010

Uganda 696.2 583.2 805.9 948.0 945.7 1,005.1 -113.0 222.7 142.1 -2.3 59.4

anzania 289.4 292.1 279.7 520.3 574.3 735.2 2.7 -12.4 240.6 54.0 160.9Kenya 1,035.9 819.9 1,144.1 1,395.4 1,331.9 1,534.0 -216.0 324.2 251.3 -63.5 202.1

Rwanda 134.0 176.4 247.1 440.4 456.6 …. 42.4 70.7 193.3 16.2 …..

Burundi 63.1 66.4 84.8 90.7 …… …… 3.3 18.4 5.9 …… ……

otal Exports

Uganda 144.7 152.8 274.8 377.4 398.8 428.6 8.1 122.0 102.6 21.4 29.8

anzania 289.4 117.7 173.1 315.5 263.0 450.0 -171.7 55.4 142.4 -52.5 187.0

Kenya 974.6 735.8 952.5 1,213.5 1,169.5 1,278.8 -238.8 216.7 261.0 -44.0 109.3

Rwanda 34.9 33.0 40.0 46.2 93.2 …. -1.9 7.0 6.2 47.0 ……

Burundi 4.0 5.5 5.3 6.0 ….. ….. 1.5 -0.2 0.7 ….. …… otal Imports

Uganda 551.5 430.4 531.1 570.6 546.9 576.5 -121.1 100.7 39.5 -23.7 29.6

anzania 160.5 174.4 106.6 204.8 310.5 285.2 13.9 -67.8 98.2 105.7 -25.3

Kenya 61.3 84.1 191.6 182.0 162.5 255.2 22.8 107.5 -9.6 -19.5 92.7

Rwanda 99.1 143.4 207.1 394.2 363.5 …… 44.3 63.7 187.1 -30.7 ……

Burundi 59.1 60.9 79.5 84.7 ….. …. 1.8 18.6 5.2 …… ……

Balance of rade

Uganda -406.8 -277.6 -256.3 -193.2 -148.1 -147.9 129.2 21.3 63.1 45.1 0.2

anzania -31.6 -56.7 66.5 110.7 -47.0 164.8 -25.1 123.2 44.2 -157.7 211.8

Kenya 913.3 651.7 760.9 1,031.4 1,007.0 -261.6 109.2 270.5 -24.4 1,007.0

Rwanda -64.2 110.4 -167.1 -348.0 -270.3 ….. 174.6 -277.5 -180.9 77.7 ….

Burundi -55.1 -55.4 -74.2 -78.7 ….. …. -0.3 -18.8 -4.5 …… ….

Source: Partner State Bureaus of Statistics (Various).

Burundi: Although Burundi experiences the lowest trade volumes in EAC, her trade perormanceimproved rom US $63.1 million in 2006 to US $90.7 million in 2008. Te highest increase in Burundi’strade with EAC was recorded in 2007 by US $84.8 million. Exports increased by US $4.0 million in 2006and US $6.0 million in 2008. In addition, imports also increasing in Burundi by US $ 1.5 million in 2006and by US $5.2 in 2008. Troughout the review period, Burundi has been experiencing trade deficits.

Kenya: In 2006, Kenya’s trade declined by about US $109.2 million. Exports declined by US $238.5 millionin 2006. Kenya’s trade with EAC partner states has been significant recording a surplus throughout 2006 to2008. Te surplus however recorded a decline o US $261.1 million but later expanded by respectively US$107.9 and US $270.5 in 2007 and 2008. Substantial declines were recorded in 2009 and 2010 indicatingsubstantial imports.

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anzania: anzania’s trade with the EAC has been recording remarkable improvement with surplusessince 2008. Both imports and exports have recorded mixed perormance.

Uganda: Uganda’s trade improved rom a decline o about US$113 million in 2006 to a positive increase o

US$222.7 in 2007 and 142.1 in 2008. Perormance slowed down in 2009 and 2010..

Rwanda: Rwanda or the period in which data is available recorded a significant improvement in tradewith EAC partner states between 2007 and 2008.

2.4.3 Commodity Exports

Annex 2 lists the composition o leading commodities in the intra-EAC trade or each Partner State.Burundi’s leading exports include gold, tea and mate, sugar, coffee and hides and skin. Kenya is a leadingimporter o Burundi’s commodities except sugar, molasses and honey which Rwanda is a leading importer.Further, Burundi’s coffee exports are destined to all the EAC partner states, but anzania and Uganda areleading recipients. Kenya’s trade with the rest o the EAC partner states is based on petroleum products,articles o apparel, construction materials (lime and cement), steel and soaps, cleansers and polishes.

Te leading market destination in EAC is Uganda. However, all the EAC partner states are leadingrecipients o Kenya’s exports particularly on petroleum products. Rwanda’s trading commodities includetea, coffee, ores and concentrates, hides and skins and petroleum products. From table 2.10, it is evidentthat Rwanda’s exports destinations are Kenya, anzania and Uganda. Burundi’s leading imports romRwanda is petroleum products.

Fish, tea, cotton, halogen salt, maize and textile products are anzania’s leading trade commodities inEAC. Most o anzania’s exports are destined to Kenya, then to the rest o the EAC member states. Kenya isa leading importer o anzania’s trade commodities except elements/oxides/halogen salt to which Burundiis a leading importer. O all anzania’s trade commodities, Kenya imports mostly tea, fish and cotton

which constitute over 90 per cent o total anzania’s exports each. Uganda’s leading trading commoditiesare destined to all the EAC partner states with vegetables, steel, maize and tobacco being imported by allthe countries in EAC. Most o Uganda’s tea exports are destined to Kenya and while electric current issupplied to Kenya, Rwanda and anzania. Te composition o the traded products shows that EAC regionneeds to invest more in manuactured exports through in part, investment in science and technology.Value added and diversified products have the potential to generate huge amounts o income leading toimproved welare o the people o the region.

2.4.5 GDP Sectoral Shares

able 2.6 shows that the industrial share o GDP declined or the region. Te industrial sector has beenstagnant, an indication that there very little value addition in the manuacturing sectors in particular.

Te industrial share o GDP in Uganda increased rom 22.6 per cent in 2006 to 24.9 per cent in 2010.anzania’s share increased rom 20.8 in 2006 to 22.3 per cent in 2010. Te industrial share o GDP inKenya stagnated at 16-17 percent between 2006 and 2010. Similarly Rwanda’s industrial share o GDPremained constant at 14 -15 per cent between 2006 and 2010.

EAC potential to produce diversified and value added manuactured exports still remains untapped. Teregion can stimulate production o diversified and value added exports to enhance export-led or trade-led economic growth and development. Te region exports mostly primary commodities and limitedrange o value added commodities (Annex 2). Te EAC members states thereore need to expand theirmanuacturing sector to enhance value added exports. Burundi’s industrial share o 16-19 per cent isquite impressive.

Te agricultural shares o GDP in all the Partner States have been declining during the period underreview. Tere are marginal increases in the services sectors or all the Partner States.


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able 2.6: Sectoral Shares of GDP, 2006-2010

Agriculture Share of GDP, %

Country/Year 2006 2007 2008 2009 2010

Uganda 22.6 20.7 21.6 23.6 21.1

anzania 26.2 25.8 25.7 24.6 24.1

Kenya 23.8 22 22.7 23.9 22

Rwanda 38 36 32 34 …..

Burundi 48.58 48.42 46.85 47.04 43.86

Industry Share of GDP

Uganda 22.3 23.9 24 23.8 24.9

anzania 20.8 21.2 21 22 22.3

Kenya 16.4 16.3 17.4 16.9 17.3

Rwanda 14 14 15 14 …..

Burundi 19.37 16.4 16.86 16.29 17.48

Services Share of GDP

Uganda 49.1 49 48 46.2 47.7

anzania 43.3 43.3 43.8 43.6 43.9

Kenya 49.7 50.8 48.8 48.3 48.9Rwanda 42 45 46 46 …..

Burundi 32.05 35.18 36.29 36.87 38.66


2.5 Investment

2.5.1 Foreign Direct Investment (FDI) PerformanceFDI inflows are expected to contribute to the realization o the economic potential in the EAC region.From able 2.7 Uganda and anzania remains the preerred destination o FDI. Te FDI comes in throughtranser o new technologies, managerial skills, stimulation in the establishment o micro, small and mediumenterprises and employment opportunities. FDI can also expand the variety o goods and services availablein the region expanding consumption range.


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able 2.7: Foreign Direct Investment (FDI) Inflow and Stocks (Million US Dollars)

FDI INFLOWS

Year 2006 2007 2008 2009 2010

Uganda 644 792 729 816 848Tanzania 597 647 679 645 700

Kenya 51 729 96 116 186

Rwanda 30.6 82.3 103.4 118.7 102.6

Burundi 0 1 14 10 ……

EAC Total 1,323 2,192 1,679 1,714

FDI STOCK

Uganda 2,669 3,402 4,189 4,988 …..

Tanzania 5,342 5,942 6,621 7,266 ……

Kenya 1,164 1,893 1,989 2,129 ……

Rwanda 108 190 293 412 ……Burundi 47 48 62 71 …….

EAC Total 9,330 11,475 13,154 14,866 ……


FDI attraction and retention is thereore one o priority areas identified or development by the EAC. Teoverall inflow o FDI to EAC increased rom a total o US $1,323 million in 2006 to US $1,714 million in2009. In terms o stocks, the region accumulated FDI rom US $9,330 in 2006 to US $14,866 million in 2009with each partner state recording increases, except or Kenya where both FDI and stocks have maintained.

In Uganda the investment inflows were concentrated in manuacturing (22%) construction (18%),wholesale and retail trade, catering and accommodation services (17%), electricity, gas and water (16%)and transport, communication and storage (9%). In anzania the investment inflows concentrated intourism (31%), manuacturing (29%), transportation (15%), commercial building (14%) and agriculture(4%). Te other sectors recorded 7%. anzania scored the first position worldwide in the investors afercare service category awarded by WAIPA in 2007.

In Kenya, investment is concentrated around tourism, provision o services especially in the communicationstechnology sector and manuacture o ast moving consumer goods and inrastructure. Kenya became the8th most reormed nation in the world according to the DOING-BUSINESS indicators assessment doneby the World Bank in 2009. By December 2007, the Rwanda Investment and Export Promotion Agency(RIEPA) had awarded 123 certificates o registration to projects worth US$496 million against a target o

US$229 million set or the year.

2.5.2 Political Risk

Te FDI inflows correlate inversely with the levels o political risks associated with any country. Tepolitical risk indicator is a composite o diverse issues covering governability, socioeconomic environment,ethnic tensions, constitutes components (Annex 3). Te sum total o the component’s indexes rankingsindicates whether a country is o high or low risk politically. On the basis o the International Country RiskGuide (ICRG) indicators, the higher the score, the lower the risk. Country specific scores between 0 to 49.5per cent are associated with very high risk; 50 to 59.5 per cent is high risk; 60 to 69.5 per cent is moderaterisk and 80 to 100 per cent is very low risk. Uganda, Kenya and anzania constitute the 140 countries that

are ranked under the ICGR system. Rwanda and Burundi are not considered in ICRG system. Te threePartner State scores have registered gradual but steady increases during the period under review. Te rangeo Political Risk Scores or the period 2006-2010 or Uganda are 55- 56; anzania 62- 64 and Kenya 56- 58.On the basis o these ratings, there is room or improving governance, rule o law and socio-economicissues in the region in order to improve investment conditions in the region. High political risk affects


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economic perormance o a country or region and in particular investment flows.

2.6 Human Development Performance

able 2.8 compares the state o human development among the EAC partner states on the basis oachievements o HDI and MDG on lie expectancy. Kenya’s, anzania’s and Uganda’s HD declined romMedium to low HD. Rwanda’s and Burundi’s HD although low throughout 2006 to 2010 have also beenexperiencing declining trends. Te HD trend shows that the quality o lie in EAC has been deterioratingover the ocus period, though positive indications are beginning to appear stating 2009. Te EAC averageHD also shows the deterioration o the quality o lie among the people o EAC region. On average,the EAC lie expectancy is at 52.5 years. Te lie expectancy o partner states have maintained upwardincreases between 2006 and 2010. Overall, the lie expectancy is still low in the EAC region compared toglobal averages o 63 years and over 75 years or the first world.

able 2.8: Human Development Index (HDI), 2006-2010

Indicator Partner State 2006 2007 2008 2009 2010

HumanDevelopmentIndex (HDI)

Uganda 0.505 0.514 0.514 0.416 0.422

anzania 0.519 0.530 0.530 0.392 0.398

Kenya 0.535 0.541 0.541 0.464 0.470

Rwanda 0.455 0.460 0.460 0.379 0.385

Burundi 0.387 0.394 0.394 0.276 0.282

EAC Average 0.48 0.49 0.49 0.38 0.39

Lie Expectancy at

birth, total (years)

Uganda 51 51.9 53 52.4 54.1

anzania 54 55 56 55.4 56.9

Kenya 53 53.6 54 54.2 55.6

Rwanda 49 49.7 50 50 51.1Burundi 50 50.1 50.1 50.3 51.4

EAC Average 51.4 52.1 52.6 52.5 53.8

Source: HDI Reports 2006-2010

2.7 Infrastructure Development

2.7.1 Level and Access to Affordable Infrastructure

Te EAC Partner States have identified the needed joint inrastructure investments aimed at overcomingthe supply constraints which increases the transaction costs and thus induces profitability and productivity

o investments. EAC has been coordinating and harmonizing transport and communication policies so asto improve the existing links and establish new ones. Results so ar have not been very encouraging becauseo the inefficiency o the region’s largest port at Mombasa and the Kenya-Uganda railway line, Arusha –Namanga -Athi River, Mombasa and Dar es Salaam ports and other acilities that connect the countries.able 2.9 summarizes the level o perception by the business community on the state o inrastructure.

able 2.9: Level of Access to Affordable and Reliable Infrastructure

Sectoral Criteria Kenya Uganda anzania Rwanda Burundi otal average

Quality and cost o transport(roads, railways, air, sea) 24% 29% 46% 34% 28% 32%

Access to water

52% 65% 42% 48% 50% 51%Access to affordable and reliableenergy 33% 38% 38% 41% 25% 35%

Access to affordable and reliableIC 53% 71% 62% 57% 38% 56%

Source: EABC Study (2008)


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Te rating or the quality and cost o transport within the region ranged rom 24% or Kenya to 46% oranzania with the average o 32%. On the whole transport was rated the lowest with an average o 32%ollowed by energy (35%), water (51%) and IC (56%).

Te World Bank Logistics Perormance Index (2007) points to the relatively low quality o inrastructurein Sub-Saharan Arica (able 2.10). Te SSA average is ar below the OECD targets.

able 2.10: Logistics Performance Indicators for Africa

Region Quality of Infrastructure Logistics Competence

1. East Arica 2.05 2.24

2. Western Arica 2.08 2.33

3. Central Arica 2.13 2.31

4. Northern Arica 2.36 2.83

5. Southern Arica 2.47 2.69

6. SSA Average 2.11 2.32

7. OECD Average 3.62 3.65 Source: World Bank, 2007

Te LPI represent simple averages scores ranging rom 1 (lowest) to 5 (highest). Te East Arican regionhas the lowest score on quality o inrastructure at 2.05 compared to Southern Arica with 2.47 and theOECD average o 3.62. Te index also finds relatively low scores or the logistics competence or East Aricaat 2.24 as compared to Northern Arica with 2.83 and OECD average o 3.65. On the overall score the East

Arican region scores are both lower than the SSA average scores. Te quality and logistics competence oinrastructure and IC is likely to influence the patterns o trade and economic development. Te EACneeds to prioritise inrastructure development as a precursor to development.

able 2.11 shows the LPI and its components shows that Uganda has the highest LPI score in East Arica.Although EAC Partner States scores are lower, Uganda has better customs procedures, logistics competenceand inrastructure abilities at respectively 2.84, 2.35 and 2.59. On the other hand, o the EAC countrieswhose data is available, Rwanda has the lowest scores in customs process, inrastructure quality and logisticcompetence as shown in able 2.11.

Te EAC, Sub-Saharan Arica and low income countries exhibit similar trends showing low levels o scores.Tis is because o the challenges such as cumbersome customs procedures, dilapidated inrastructure andpoor logistics competence that slow the pace o economic development. Te East Arican region has thelowest score on quality o inrastructure at 2.05 compared to Southern Arica with 2.47 and the Highincome countries’ average o 3.56. Te index also finds relatively low scores or the logistics competence orEast Arica at 2.28 as compared to Northern Arica with 2.83 and High income countries’ average o 3.50.Te East Arican quality o customs processes score at 2.28 is higher compared to the Sub-Saharan regionat 2.18 which reflects the achievements by the EAC common market. Te quality o customs processes,inrastructure and logistics competence, in part, is likely to spur trade expansion, economic growth anddevelopment.


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able 2.11 Logistics Performance Indicators (LPI) for EAC

Country/Region LPI Rank Customs InfrastructureLogistics

Competence

Uganda 2.82 66 2.84 2.35 2.59

Tanzania 2.60 95 2.42 2.00 2.38

Kenya 2.59 99 2.23 2.14 2.28

Rwanda 2.04 151 1.63 1.63 1.85

Burundi - - - - -

East Africa (excluding Burundi) 2.51 - 2.28 2.03 2.28

Europe and Central Asia 2.74 1 2.35 2.41 2.60

Latin America and Caribbean 2.74 2 2.38 2.46 2.62

East Asia and Pacic 2.73 3 2.41 2.46 2.58

Middle East and Pacic 2.60 4 2.33 2.36 2.53

South Asia 2.49 5 2.22 2.13 2.33

Sub-Saharan Africa 2.42 6 2.18 2.05 2.28

High Income (OECD) 3.55 1 3.36 3.56 3.50

Upper Middle Income 2.82 2 2.49 2.54 2.71

Lower Middle Income 2.59 3 2.23 2.27 2.48

Low Income 2.43 4 2.19 2.06 2.25Source: World Bank 2010.

2.7.2 Energy Development

Energy development is a critical element o economic development that the EAC has prioritized. Article101 o the EAC treaty stipulates policies that the EAC PS will adopt to promote efficient exploitation andutilization o various energy sources in the region. Te priority energy areas o ocus include green energy,geothermal electricity and hydro-power generation. Te EAC has committed is working towards provisiono adequate and affordable energy to the East Arican people. Improved access o energy sources especiallyelectricity will improve human development conditions in East Arica. Tis is because energy leads toprovision o water, improvement o industrial and agricultural productivity, better health and education

conditions and environmental sustainability. Majority o the East Arican people are based in the ruralareas and lack adequate energy supply resulting in the use o uel wood and charcoal. Te urban areas arealso affected since the urban poor lack adequate access to energy sources. Majority o EAC PS are energydeficient due to the untapped energy potential that exists in the region. able 2.12 below shows selectedenergy indictors including the hydro-power generation capacities; electricity use per capita and electricitypercentage share o GDP among the EAC Partner States. Te generation capacities have not kept pace withenergy needs o the region. Nevertheless, per capita energy usage is growing aster in Kenya compared tothe rest o the Partner States.


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able 2.12: EAC Selected Energy Indicators

Energy

source

Hydro-Power Generation (GWH)

Years/2005 2006 2007 2008 2009 2010

States

Uganda 1890 1629 1905 2176 2533 2819

anzania 1,778 1,436 2,512 2,649 3,290 …..

Kenya 3,039 3,025 3,592 3,267 2161 3224

Rwanda 116 168 165 72 - -

Burundi 100 93 117 112 - -

Electricity Use Per Capita

Uganda 58.9 66.6 73.54 82.6 88.7

anzania 3.3 3 3 3 2.5

Kenya 128.2 131.6 139 139.7 140.6 144.6

Rwanda - - - 142 - -

Burundi 22.6 19.6 24.2 23.4 - -

Share of Electricity to GDP (%)

Uganda 1.5 1.5 2.1 1.8 1.4 1.6

anzania 1.7 1.6 2.1 2 2.5

Kenya 1.3 0.29 0.8 0.25 0.23 0.23

Rwanda 0.5 0.7 0.7 1 - -

Burundi - - - - - -Source: EAC Facts and Figures 2009, National Bureaus of Statistics Reports (Various)

2.7.3 Information, Communication and echnology (IC)

Inormation and communication technology (IC) is increasingly becoming the EAC Common Market’spriority area in pursuit o economic growth and development among partner states. IC is critical towardssocio-economic and political developments in the region. In addition, IC is considered as a channelthrough which the EAC common market will improve global access o her people and competitiveness ogoods and services rom the region. Articles 89, 99 and 103 o the EAC reaty highlight the EAC quest toimprove IC to oster efforts towards economic development.

able 2.13 shows internet use and mobile subscriptions has been growing in East Arica. Comparatively,Kenya has the largest use and subscriptions respectively ollowed by Uganda and anzania. Rwanda andBurundi recorded low but increasing internet use and mobile subscriptions. Te overall EAC internet useincreased respectively rom about 2.1 to 6.75 million and 9.7 to 39.7 million both rom 2005 to 2008. TeEAC-World share o internet use and mobile subscription improved rom 0.2 to 0.4 percent and 0.4 to 1percent respectively over the same period. Except or Uganda and Rwanda that experienced growth inshare o Arica internet use, anzania, Kenya and Burundi experienced declines in 2008.


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able 2.13 Internet Users and Mobile Phone Subscription in EAC

Country

Internet Users (thousands/percentages) Mobile Phone Subscription (thousands/percentages)

2 0 0 5

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9

2 0 1 0

2 0 0 5

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9

2 0 1 0

Uganda 500 750 1,125 2,500 …. …. 1,315 2,827 5329 8,723 9,618 13,155

Tanzania 384 390 400 520 …. ….. 3,390 5,767 8,323 13,007 …. ….

Kenya 310 753 795 867 1,004 2,098 4,612 7,340 11,349 16,304 19,365 24,969

Rwanda 50 100 200 300 ….. ….. 223 314 635 1,323 …. …

Burundi 40 50 55 65 ….. ….. 153 200 270 481 ….. ….

East AfricaTotal

2,085 3,960 4,780 6,745 …… ….. 9,693 15,630 24,773 39,668 …. ….

AfricaTotal 1

6 , 0

0 0

2 2 , 0

0 0

2 7 , 0

0 0

4 5 , 0

0 0

… . .

… .

8 8 , 0

0 0

1 3 0 , 0

0 0

1 7 4 , 0

0 0

2 4 6 , 0

0 0

… … .

WorldTotal

1 , 0

3 6 , 0

0 0

1 , 1

5 9 , 0

0 0

1 , 3

9 3 , 0

0 0

1 , 6

1 1 , 0

0 0

… .

… .

2 , 2

1 7 , 0

0 0

2 , 7

5 6 , 0

0 0

3 , 3

5 4 , 0

0 0

4 , 0

1 2 , 0

0 0

… .

…

EAC and Partner States World and African shares (Percentages)

EAC-

World 0.2 0.3 0.3 0.4 …. ….. 0.4 0.6 0.7 1.0 ….. …

EAC-Arica

13 18 18 15 …. …. 11 12 14 16 … ….

Uganda-Arica

3.1 3.4 4.2 5.6 …. …. 1.5 1.5 2.4 3.5 …. ….

anzania-Arica

2.4 1.8 1.5 1.2 …. …. 3.9 4.4 4.8 5.3 …. ….

Kenya-Arica

6.9 12.6 11.1 7.5 …. …. 5.2 5.6 6.5 6.6 …. ….

Rwanda-

Arica

0.3 0.5 0.7 0.7 …. …. 0.3 0.2 0.4 0.5 … …

Burundi-Arica

0.3 0.2 0.2 0.1 …. …. 0.2 0.2 0.2 0.2 … …

Source: National Bureaus of Statistics, World Bank (WDI) and International elecommunications Union (IU) Statistics 2010


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2.9 Cross-cutting Issues

Te cross-cutting issues o gender equality, health and sustainable utilization o natural resources ormscardinal objectives o EAC which in part is being monitored at partner state level through achievements oMDGs (able 2.14). Rwanda is leading in terms o Gender Equality and Empowerment o Women (Goal3). Te proportion o women parliamentarians has increased rom 49 to 56 per cent or Rwanda; Uganda30 to 31 per cent; anzania 30 to 32 per cent; and Kenya 7 to 10 per cent 2006 and 2010. Burundi’s womenparliamentarians were constant at 31 per cent.

Te EAC is working towards better access to medical services so that the effects o HIV/AIDS, malariaand B diseases (MDG 6) on economic growth and development are reduced. Te HIV/AIDS prevalencein Uganda, Rwanda and Burundi remained at 6 per cent, 3 per cent and 2 per cent respectively between2006 and 2008. In anzania, HIV/AIDS prevalence declined rom 7 per cent in 2006 to 6 per cent in 2008.Similarly, the prevalence on the incidence o tuberculosis in EAC has been declining. In Uganda, theincidence per 100,000 people declined rom 350 in 2006 to 310 in 2008. In anzania, Kenya, Rwanda andBurundi during the same period, it declined respectively rom 200 to 190, 370 to 330, 410 to 390 and 380to 360. Tis is an indication o the EAC success in mitigating the spread o HIV/AIDS and uberculosis.Nevertheless, access to medication by the inected East Aricans should be sustained to guarantee themlonger and happy living.

One o the objectives o the EAC in article 5 (c) o the reaty is collaboration among partner states towardsmaintenance o sustainable utilization o natural resources and protection o the environment, which isconsistent with MDG 7. Te orest cover among some EAC partner states has declined greatly below theUnited Nations benchmark o at least 10 per cent or more orest cover in a country. anzania, Rwandaand Uganda are the countries in East Arica with over 10 per cent o orest cover. Kenya and Burundi

have the lowest orest cover which remained at 5-6% between 2006 and 2008. Te region thereore shouldcollaborate in the restoration o orest cover. Kenya has embarked on an ambitious program to plant treesin Kenya’s major water catchment areas including Mau, Aberdares and Mt. Kenya orests. Article 111 o thereaty underpins the need or cooperation and partnerships in the management o the environment andthe natural resources. Tis is more critical now in the current period o adverse climate changes.


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able 2.14: Millennium Development Goals (MDGs) for Cross-cutting Issues

MDGS Indicator Partner State 2006 2007 2008 2009 2010

MDG 3:PromoteGenderEquality

andEmpowerWomen

Proportiono seats heldby womenin nationalparliaments

(%)

Uganda 30 30 31 31 32

anzania 30 30 30 30 31

Kenya 7 7 9 10 10

Rwanda 49 49 56 56 56

Burundi 31 31 31 31 31

MDG 6: Combat

HIV/

AIDS,Malaria

and otherdiseases

HIV/AIDSprevalence (%o populationaged 15-49)

Uganda 6 6 6 - -

anzania 7 6 6 5.7 5.7

Kenya 5 8 7 - -

Rwanda 3 3 3 - -

Burundi 2 2 - - -

Incidence otuberculosis(per 100,000

people)

Uganda 350 330 310 - -

anzania 200 190 190 - -

Kenya 370 350 330 - -

Rwanda 408 397 387 376 -

Burundi 380 370 360 - -

MDG 7:

Ensure En-

vironmen-

tal Sustain-

ability

otal ForestCover (sq.

Documents

Strategy Eac Development-V4 2011-2016